Advisory fees totalling more than £30 million will be generated by the proposed £1.8 billion takeover of Punch Taverns by Heineken and Patron Capital, its private equity partner.
According to the offer document, the joint bidders expect to incur up to £21 million of fees and expenses, with Patron spending £4.25 million for financial and corporate broking advice from Rothschild and Heineken paying £5 million to Nomura.
Legal fees for the two companies will total up to £4.4 million, while the Dutch brewer will fork out £680,000 to secure a £340 million loan from Nomura to fund its purchase of 1,900 of Punch’s 3,275 pubs.
Punch will incur advisory fees of up to £5.2 million with Goldman Sachs, while legal advice will cost it a further £2.6 million. Its total bill is estimated to be between £9 million and £10 million.
Duncan Garrood, Punch’s chief executive, will collect a relatively modest pay-off in the event that the 180p-a-share deal goes through. Assuming that he leaves after the takeover, he would be entitled to up to a year’s salary and benefits. Mr Garrood, who is on a basic salary of £400,000, would also collect an estimated £500,000 under a long-term incentive plan.
Advertisement
Stephen Dando, chief financial officer, is paid a basic salary of £292,000 and is sitting on LTIP shares worth almost £375,000. Mr Dando also owns or is entitled to Punch shares worth about £82,000.
The £1.8 billion bid, £402.7 million of which is in equity and £1.38 billion in assumed debt, has been recommended by the Punch board and has the backing of Punch’s three biggest shareholders Glenview Capital, Avenue Capital and Warwick Capital Partners, speaking for 52 per cent of the shares.
However, the Punch board is still talking to another suitor, Emerald Investment Partners, led by Alan McIntosh, a former Punch finance director. Emerald, which has yet to confirm funding, has until the close of play on February 3 to put an offer of at least 200p on the table, or walk away.
In the offer document, Patron, which would emerge with almost 1,400 of Punch’s pubs, revealed that it has been working with May Capital, another private equity firm, on the bid. May Capital, which backed the £86 million purchase by Hawthorn Leisure of 275 pubs from Greene King in 2014, has an option to buy a stake of up to 5 per cent of Patron’s bidding vehicle.
Separately, Heineken confirmed that it was in talks with Kirin Holdings over a “potential transaction” regarding the Japanese brewer’s struggling Brazilian beer business, adding that there was “no certainty that an agreement will be reached”.
Advertisement
A purchase of Brasil Kirin, owner of the Schin and Baden Baden brands, would more than double the Dutch brewer’s volumes in Brazil and strengthen its hand against Anheuser-Busch InBev in one of its key markets.
A deal to buy Brasil Kirin, which operates 12 breweries, is tipped to be worth at least £700 million. Kirin said it continued to focus on expanding in Brazil, but was considering alternatives, including a strategic partnership or sale. “We are considering every option, including a discussion with Heineken,” a Kirin spokesman said.
Punch’s shares fell 1¼p to 191¼p.